Diageo not threatened by AB InBev’s, SABMiller Tie-Up – Exclusive

AB InBev’s recent acquisition of SABMiller means only a change of rival for Diageo, rather than an intensification of competition in its African beer markets. This was the opinion of Diageo’s group head of beer, Mark Sandys.

Anyone who has been following the recent events in the beer world may have heard that AB InBev’s primary attraction to SABMiller has been the latter’s strong presence in the growing African beer market.

At Diageo’s Capital Market Day in New York recently, Diageo’s global head of beer, Mark Sandys said the group was not overly concerned about AB InBev’s move. “Two-thirds of Diageo’s beer business is in what we call beer-focused markets.”

“In these markets, we have a full beer portfolio, we have a brewery, and beer makes up the majority of what we sell there. They tend to be places where we are either number one or number two in markets such as Ireland, but also in our big markets in Africa.

“If you look across all of those markets, which account for two-thirds of our total beer business and are also where our beer growth is taking place, the AB InBeV, SABMiller transaction doesn’t actually consolidate any of our competitors there. SABMiller will just change over to AB InBev in Africa, for example, while in Ireland, AB InBev is a partner of ours.”

However, Sandys agreed with AB InBev’s optimism about Africa’s potential. “Fundamentally, the reason AB InBev wants to get into Africa is because Sub-Saharan Africa is the fastest growing region within the beer world,” he said.

Earlier in his presentation to analysts, Sandys said that Diageo’s beer operations account for 20 percent of the group’s annual sales. Half of the company’s beer sales come from Sub-Saharan Africa.

Later in the day, at a media parley, CEO of Diageo, Ivan Menezes suggested the company would consider acquisitions in the region, should the transactions prompt any divestments by AB InBev. “If assets became available in Africa, we would be interested,” Menezes said. “But we’ll see how that plays out.”

While SABMiller has several joint ventures with privately-owned Castel in Africa, the change of ownership of SABMiller could prompt Castel to look for a new partner.